Last week, a number of retailers who have decided to close amidst the pandemic announced that they will be extending their returns policies. Coronavirus has certainly forced businesses to make big decisions over a very short space of time – with the ability to engage in normal shopping practices swiftly removed and adaption required immediately. What does this mean for consumers and their recent purchases? 

There are a number of changes retailers are making with their consumers in mind since the pandemic struck – and this situation is no different. Some examples include,  H&M, who have extended their returns policy from 28 days to 100 days for both in-store and online purchases, while New Look has extended its returns period to 90 days.

Meanwhile, TK Maxx says if a customer is unable to return an item within the usual 28-day window due to store closures, it will accept returns for 30 days from when its stores re-open. 

However, returns can cause particular cost implications for retailers – affecting accurate conversion rates, profit margins and incurring a lot of unsustainable waste. This week we look into the retailers who have made these extensions, the positive and negative outcomes and how retailers can regain control of this area when normality returns.

Why extend returns in this crisis?

Returns policies have often been the defining feature between online and offline retailers. Without the ability to try on items or experience them in real life, many online stores opt for looser rules when it comes to returns – despite the impact it may have on profit margins. Many have accepted this as a “cost of running an online store.” (However, 33% of online retailers offer free returns but offset the cost of this by charging for delivery). Those who already have an omnichannel presence may have restricted terms around returns where items can be returned to the store instead of returned by post and bricks and mortar stores mainly abide by the 28 day or 30-day rule given the ease of the process. 

Now, bricks and mortar and omnichannel stores are having to rethink these restrictions in line with recent events to ensure the longevity of their customer base. It’s always in a retailers interest to consider its consumers ethical priorities, with many retailers coming under fire for not closing sooner. We can assume the decision to create extended returns policies has been in-line with retailers prioritising ethical procedures – but it won’t be without certain implications

The impact that returns have on retailers.

At the end of 2019, Forbes discussed 2020 as the year retailers would take control of returns policies – tightening up restrictions in the hope of minimising the negative impact of returns on companies. In a few short months, that outlook has completely changed. 

With the announcement of extended returns, the time of year is less than favourable as we approach the change in the seasons. As consumers typically begin to stock up on holiday clothing essentials, we may see a surplus of “Summer clothing” that retailers will find difficult to shift in the winter months – hopefully when some normality has been restored. 

In general, returns can skew a business’s forecasted projections, as products that would otherwise be available for purchase are removed from inventories, creating shortages. Returns, especially when made to online retailers are unlikely to be deemed fit for resales  and results
in a negative cash flow as well as having a surplus of useless units. Clothing in particular is often superseded by next season’s range – there having little or no “salvage value”. And, typically, anything less than the original condition will need to be sold at a discount. This can also have a negative effect on businesses environmental responsibilities – Annually, Americans return approximately 3.5 billion products, with about 5 million lbs of those goods ending up in landfills according to Optoro. 

Before Covid19 became the issue it is now, Statista predicted that returns deliveries would cost $550 dollars by 2020 – 75% more than the previous years. As restrictions increase we would assume this estimate may be surpassed – however, fashion retail sales dropped by up to 29% year-on-year during lowest sales day in March in the UK, meaning there may not be as much returns as expected.

Previous to the pandemic, Narvar reported that 96% of consumers said they would shop with a retailer again based on an easy return experience. 56% of shoppers were also “much more likely” to shop with online retailers that allowed for in-store return – Therefore it’s important to remember that over half your customer base will appreciate the extended opportunity to make returns when stores reopen.

Conclusion

Returns have been a long-standing issue for retailers both online and offline before Coronavirus took over. Retailers will always have to look to new ways of minimising the amount of returns and tackling serial “wardrobers”. For now, extending the returns policies will be much more beneficial to retailers in the long run, and like the rest of the world, retailers will need to take things one day at a time as big decisions continue to be made.